It doesn’t matter if you’ve followed Mad Money’s Jim Cramer into the MAMAAs or not, the US tech quintet always causes a stir during earnings season and it’s evident that investors on Wall Street are bracing themselves for disappointment. Both Microsoft and Alphabet report after the closing bell and just the anticipation that the numbers might reflect some of the issues plaguing many of the names that have already reported has bathed indices in a sea of red.
Everyone is focussed on outlook and even though Warner Bros Discovery seems to have nabbed two million subscribers from its streaming rivals its shares have taken another tumble today with the CFO warning of a “messy year”. GE’s CEO chose to put it more bluntly warning the “challenging macro environment” put the company’s profit outlook at risk. It doesn’t matter that quarterly revenues and profit came in above expectation, investors are looking beyond that, trying to price in the new wave of supply issues and price hikes. There are outliers, just like Coca-Cola before it, Pepsi Co raised its forecast today. Buoyed by resilient demand and that all important pricing power the company saw shares tick up slightly. Some brands will enjoy consumer loyalty, particularly if they’re serving up treats the consumer might just be able to stretch to even when budgets get really tight. But even here there is a danger that if inflation stays too high for too long consumers will be forced to cut back even on those little pleasures.
Danni Hewson, AJ Bell financial analyst, said: “Results coloured London’s markets too, though the FTSE 100 at least managed to remain in positive territory. A spot of bargain hunting after miners slumped yesterday might well have been partly behind the splash of green on market pages along with a good showing from Taylor Wimpey which initially lifted the housebuilding sector. But it was the warning from Associated British Food’s that even at Primark’s prices would have to rise that really set the day’s tone. Its shares spent the day nestled at the bottom of the pile along with numerous other retailers and consumer facing businesses. Value will be vital over the next months and the shopper is notoriously savvy. Consumers will put off buying things they don’t need if the price isn’t right or if budgets don’t stretch. Price too high and people won’t buy, price too low and profits will be the victim.”